Professional Documents
Culture Documents
Long Notes
Class Revised
A. Company in Context
Legal forms of business organizations:
company- sole proprietor partnership (1. ordinary partnership 2. limited partnership)
Lts Partnerships Act 2008 trust
B. Company Law
1. Sources of Company Law
1.1 English Roots
NZ Companies Acts 1908, 1933 and 1955 mirror English Acts of 1908, 1929 and 1948.
Thus, English Company law cases = very persuasive source of law in applying NZ legislation
AUS persuasive as they adopted the English model of company legislation
L was made sole director through the companies' article of association (in it's constitution),
while also being the major shareholder (all but one of the total sahres) of his farm for top
dressing L was killed in plane crash, and Mrs L claimd compensation under the Workers Compensation
Act 1992 - to successfully claim compensation she had to prove that Mr L was a worker of the
company per the Act.
Issue was L a company 'worker'?
CA No As director,
where D agrees to lease to P, then uses premises themselves, the court held P could not sue D
Tipping J coporate veil shouldonly be lifted in certain contexts, nd circumstances where it's preseve would
create SUBSTANTIAL INJUSTICE
Important: separate legal personality is part of legitimate facet of commerce which provides certainty
CB(2) Official Assignee v 15 Insoll Avenue Ltd [2001] 2 NZLR 492 YES
(noted Watts [2001] CSLB 92)
bankrupt person incorporated company using names of ficitious persons.
issued shares to infant children. Subsequent transfers made without childrens knowledge, to other persons
without following appropriate legal procedures
Claim: D using Co to hide fund that should have been available to [creditor] OA
Held Co treated as same person as D = lifted corporate veil as the company structure was a sham, being
used to defeat creditors OA given access to land
[corporate veil is not really in existence when a company is a fake anyway it's technically a 'fake veil' thus it
has no ability at law to be present as it does when the company is a legitimate, and not a sham company]
2.6.1.2 Agency
CB(2)Smith, Stone & Knight Ltd v Birmingham Corporation [1939] 4 All ER 116
How can the finding of agency in this case be reconciled with Salomon?
Do you think that the facts upon which the agency relationship was found are unusual in parent/subsidiary
relationships?
(2)Re Polly Peck International Plc [1996] 2 All ER 433
CB(1)A-G v Equiticorp Industries Group Ltd [1996] 1 NZLR 528 (CA)
2.6.1.3 But the starting point is the importance of the doctrine of separate corporate personality
(2)DHN Food Distributors Ltd v Tower Hamlets London Borough Council [1976] 1 WLR 852
CB(2)Woolfson v Strathclyde Regional Council 1978 SC (HL) 90
(2)Montevento Holdings Pty Ltd v Scaffidi [2012] HCA 48
To what extent does this case overrule Smith, Stone & Knight Ltd v Birmingham Corporation?
CB(1)Prest v Petrodel Resources Ltd [2013] UKSC 34, [2013] 3 WLR 1.
CB(1)Re Securitibank Ltd (No 2) [1978] 2 NZLR 136 (CA) at 157-159 and 171
(2)Savill v Chase Holdings (Wellington) Ltd [1989] 1 NZLR 257 at 277282
(2)Adams v Cape Industries plc [1990] Ch 433 (CA) at 532544
(2)Hadoplane Pty Ltd v Edward Rushton Pty Ltd [1996] 1 Qd R 156 (CA)
(2)Repatriation Commission v Harrison (1997) 24 ACSR 711 (FCA)
(2)Body Corporate No 188273 v Leuschke Group Architects Ltd (2007) 8 NZCPR 914 at [37][39]
(2)OA v Sanctuary Propvest Ltd HC-Auckland, CIV 2009-404-852, 11/6/2009, Asher J
2.6.2 Under statute
CA93, s 25, and ss 271272
CB(2)HEB Contractors v Westbrook Development Ltd (2000) 8 NZCLC 262,256
(2)Mountfort v Tasman Pacific Airlines of NZ Ltd [2006] 1 NZLR 104 at [80]
McGechan J - ORTHODOX GROUND (use this decision!) looked at the elements of the tort of negligence. Had T assumed
responsibility and had A placed reasonable reliance on that statement? On the facts, T failed to assume personal responsibility.
Hardie Boys J NON-ORTHODOX - directing mind and will approach, using the attribution test of Leonards Carrying. As T
was acting as the company, he wasnt acting as himself and was not liable for his own actions. Known as disattribution
heresy. The assumption of responsibility test does not reflect a requirement of the law of tort, but rather company law.
Presumptive immunity of directors because they are identified as directing mind and will. While a subsequent CA decision,
Watson v Dolmark, distinguished Trevor Ivory on this basis: a case of personal dishonesty is distinguishable from the question
whether the owner of a one-man company comes under a duty of care
Trevor Ivory Ltd v Anderson [1992] 2 NZLR 517 (CA)
Managing director of company (and major shareholder) faced action for negligent misstatement by director of one man company
Company enter agreement with AGENT for paid consultancy
In consult, company provided advice on how to deal with cooch grass using their product
Agent advised to use their product, but not HOW to use it, or that it would kill his raspberry plants killed raspberry plants
He replanted boysenberries and sued Mr Ivory personally for negligent misstatement and breach of contract
Issue at trial: Was the advice negligent?
Held: Company was liable in negligence and contract, and director liable in negligence
Appealed by Director Issue Was the director personally liable for the negligent advice?
CA unanimous: upheld appeal - Mr Ivory, the director, could not be held personally liable for the advice he gave pursuant to the
It must be shown that Mr Ivory PERSONALLY ASSUMED RESPONSIBILITY for that advice company
law is irrelevant to this question it is reliant solely upon the relevant tortious principles
Application: hard to show that one man company director was taking personal responsibility for advice the
As directing mind and will of the company, the director was the embodiment of the company, thus his actions
are the companys and not his own
This means the actors actions become DISATTRIBUTED to himself, and instead attributed to the
company
This means you must show that he was the acting mind and will of the company and had
ASSUMED responsibility for the agents actions
CB(1)Creasey v Breachwood Motors Ltd [1993] BCLC 480 (overruled in (2)Ord v Belhaven Pubs Ltd [1998] 2 BCLC
447 (CA))
Creasey is only one of several variants of the phoenix phenomenon. Often there are even more creditors who are left out in
the cold. Sometimes the shareholders/directors not only leave creditors without assets, but use the assets to pay debts owed
to themselves by the company. The shareholders/directors are not always as culpable as they were in Creasey
sometimes they simply find that their company goes into insolvent liquidation, and they then set up a second company
through which to continue their business.
Try to distinguish the different concerns that creditors may have in these variants. Do you think that lifting the corporate
veil is an appropriate way to respond to them?
CB(2)Lion Nathan Ltd v Lee (1997) 8 NZCLC 261,360
evidence fell short of providing a foundation from which it could be inferred that directors
had deliberately and knowingly set out to cheat or defraud LN in terms of s320(1)(c)
- not seeking to benefit themselves
- commercial reality that trust's loan had to be repaid in full for refinancing with ANZ
- LN wouldn't have received anything had the Co been liquidated, and the Directors actions did
nothing to worsen this reality
CB(1)Gray v Wilson (1998) 8 NZCLC 261,530
CB(2)Sojourner v Robb, Re Kut Price Yachts Ltd [2008] 1 NZLR 751 (CA)
(HC decision upheld on issue of sale at an undervalue of business to a phoenix company)